Can Transferring Your Home to a Trust Trigger Your Mortgage? Understanding the Law in California
Many California homeowners worry that transferring their home into a trust might trigger their mortgage lender to call the loan due. Fortunately, in most cases, this fear is unfounded—especially when the transfer is made for estate planning purposes.
California Law and Mortgages
Under California law, a mortgage is a contract that uses property as security for the performance of an obligation—typically repayment of a loan—without requiring a change in possession of the property (Cal. Civ. Code § 2920; La Arcada Co. v. Bank of America, 120 Cal. App. 397). Further, California Civil Code § 2924 clarifies that a transfer of interest in property, if made solely as security for the performance of an act, is still considered a mortgage. This means that not every transfer constitutes a sale or triggers lender remedies.
The Role of the Due-on-Sale Clause
The question of whether a lender can demand full repayment (or “accelerate” the loan) often hinges on the presence of a due-on-sale clause in the mortgage or deed of trust. These clauses allow lenders to call the loan due if the borrower transfers any interest in the property without their consent.
Federal Protections Under Garn-St. Germain
However, there’s a key federal protection that benefits many homeowners. The Garn-St. Germain Depository Institutions Act of 1982 prohibits lenders from enforcing a due-on-sale clause when a property is transferred into a revocable living trust, as long as:
- The borrower remains a beneficiary of the trust, and
- The property continues to be the borrower’s primary residence.
This means that in most estate planning scenarios—where a homeowner transfers their personal residence into a revocable trust and continues living in it—the lender cannot demand full repayment just because the home was retitled in the name of the trust.
What Homeowners Should Know
While California law and federal protections generally support homeowners transferring their residence into a trust, it’s always best to:
- Review your mortgage documents to identify any due-on-sale provisions
- Consult with your estate planning attorney to ensure your trust is structured properly
- Consider notifying your lender of the trust transfer, even if not legally required
This step can provide peace of mind and clarity in your planning process.
Need Help Reviewing Your Estate Plan?
At Kaminski Law Group, we regularly help California homeowners structure their estate plans to avoid probate while preserving their mortgage terms. If you have questions about transferring your home to a trust, we’re here to help.
📞 Call us at (916) 540-7618 or 📧 email us at hello@californiatrusts.law to schedule your consultation.
